THE ECONOMETRICS OF MACROECONOMIC MODELLING
Do estimated wage-price models support the NAIRU view of equilibrium unemployment?
The analysis of this chapter has shown that there is no logical reason why dynamic stability of real wages and inflation should imply or ‘require’ a supply-side determined NAIRU. Conversely, by claiming that a derived (and estimated) NAIRU from an incomplete system of equations corresponds to the dynamic equilibrium level of unemployment in the economy, one invokes restrictions on the (unspecified) wage-price dynamics that may or may not hold empirically.
As we have seen, there are necessary conditions for correspondence that can be tested from wage equations alone. This is fortunate, since a range of studies estimate wage models of the ICM type. Often the aim of the studies have been to estimate the NAIRU, or at least to isolate its determinants. They represent a body of research evidence that can be re-interpreted using our framework. While not claiming to be complete, Section 6.7.1 aims to summarise the evidence found in several econometric studies of (single-equation) wage models. Section 6.7.2 then discusses in more detail the NAIRU implications of a wage-price system estimated for United Kingdom aggregate data.
The P*-model is presented in Section 8.5.4. The basic variables of the model are calculated in much the same way for Norway as for the Euro area in the previous …
Both models condition upon the rate of unemployment ut, average labour productivity at, import prices pit, and GDP mainland output yt. In order to investigate the dynamic forecasting properties we …
Consider the NPCM (with forward term only) estimated on quarterly Norwegian data[65]: Apt = 1.06 Apt+1 + 0.01 wst + 0.04 Apit + dummies (7.21) (0.11) (0.02) (0.02) x2(10) = …
